Fiscal Policy

2009 Exchequer Deficit

The December Exchequer returns have now been published. The Exchequer deficit for 2009 was €24.6 billion, almost twice the level recorded in 2008. That said, the figures came in a bit better than most people expected a number of months ago, which is good news.

As an aside, I’d note that this outcome clearly falls somewhat short of the “close to €30 billion” deficit mentioned in the letter signed by the 46 economists in August. As I noted at the time, I think this was pretty reasonable in the context of what was known then. Of course, this figure was not an important part of the letter. The substance of the letter related to NAMA and the only point of the deficit references, as I understood it, was to put the risk of NAMA losses in a context.

I have little doubt now that the comments section here will soon contain denunciations of the famed “46” declaring them to be all sorts of evil. But then flame-throwing trolls are an unfortunate part of any blog that allows comments.

78 replies on “2009 Exchequer Deficit”

I’m quite pleased with my own forecast for the tax take. This is what I posted here on 2nd October. I’ve edited it slightly, as it was in the context of a heated debate with some other posters, which I have no wish to revisit. All told, I think my own forecast for the tax take was more accurate than any other forecast I’ve seen either here or in the media, although I’ll naturally stand corrected if someone shows me one that came closer.

JohnTheOptimist – October 2009:

“Now, today’’s figures show that the slippage up to end-September was €965m (€23,706 collected against €24,671). So, it is slipping by an additional €200m a month. If we project that to year-end, it brings the slippage for the whole of 2009 to about €1,550m, which implies a tax take in 2009 of €32.9bn.”

The actual outcome for the tax take was 33.043 billion euros. So, I UNDER-estimated it by 143 million. In view of that, I may have to change my name to JohnThePessimist.

I still have a downloaded Newstalk 106 Radio podcast where Dr. Garret Fitzgerald and Mr. Karl Whelan decided to flesh things out a bit. It was hell for leather, on the subject of the €30.0 bn figure, which Dr. Fitzgerald didn’t appreciate.

I know Eamon Keane still has some highlights on the website. I don’t know if the Fitzgerald/Whelan debate is still there though. It is quite a good podcast.


Well I didn’t express an opinion on the issue at the time and I have aften criticised DoF forecasts so I won’t gloat. In fact, here are some lyrics from a big yellow bird to cheer you up:

Oh everyone makes mistakes.
Oh, yes they do
Your sister and your brother and your dad and mother too;
Big people, small people, matter of fact, all people!
Everyone makes mistakes, so why can’t you?

What, counterfactually and hypothetically, would you have forecast using june/july figures?

@Brian Lucey

“JTO. What, counterfactually and hypothetically, would you have forecast using june/july figures?”

No need for ‘counterfactually and hypothetically’. The matter was actually debated here on 6th August, just after the July returns were published. I remember it well, as I posted it from an undergound internet cafe in Vietnam, surrounded by about a million Vietnamese. It is all in here.

In that thread, a number of posters (I will mention no names) had predicted, on the basis of the July returns, that the tax take for 2009 would be under 30 billion. I challenged them and wrote as follows at the time.

“Those economists above who are predicting a tax take of just 30 billion in 2009 are being alarmist, if not completely bonkers. It is very unlikely that the tax take in 2009 will be as low as this… So, the net outcome will probably be that Brian Lenihan misses his budget target by a very modest amount.”

It was, of course, inexcusable of me to use the word ‘bonkers’ (probably due to the temperature in the underground internet cafe being about 500 degrees), for which I unreservedly apologise. But, my use of the word ‘alarmist’ in relation to them has proved completely justified.

Although I didn’t put a precise figure on it in that post, by ‘a very modest amount’, I had in mind at that time (6th August) that the tax take would be in the range 33.5-34.0 billion, so I was a bit over-optimistic then. I later revised my forecast to 32.9 billion on 2nd October (as described in my post above), which has proved a trifle pessimistic.

As I am not one to gloat (except when Tyrone win the All-Ireland), rather than debate about who got it right and who got it wrong in 2009, it might be better if there was some serious discussion about what the figure actually means, and how it will affect the markets and investors’ perceptions of the Irish economy.

At the time of the December budget, which was only a few weeks ago, the figure given for the general government deficit in 2009 as a percentage of GDP was 11.75%. This is also the figure given in ESRI’s Quarterly Report, which was published after that budget. However, today’s figures show the deficit in 2009 coming in at 620 million less than predicted at the time of the December budget. So, by my reckoning (unless there is some other item hidden away in the small print of today’s returns), this means that the general government deficit in 2009 as a percentage of GDP will now be 11.4%. This is, of course, far from brilliant, but it is certainly below the forecast deficits for Greece, U. Kingdom and U. States. It is also quite close to what was forecast by Brian Lenihan (10.7%) in his April budget. In contrast, nearly every country, particularily the three mentioned above, have seen their predicted deficits greatly increase since April last. Back then, it was being widely predicted that Ireland’s deficit in 2009 would be by far the highest in the OECD. This is no longer the case. The budget outlook for other countries has worsened significantly since April, while holding relatively steady in Ireland. So, in relative terms, if not absolute terms, the bugetary situation for Ireland is much better now than in April last. I would hope this will be reflected in both the stock exchange and bond market.


Thank you, Dreaded_Estate. While I’m happy to claim victory here, I must concede that, in relation to house prices, your forecasts have consistently proved much more accurate than mine. I will forecast the 2010 tax take in due course, but 6th January is too soon.

I’m still trying to work out why the December 2009 tax take is so much higher than in December 2008. Its up 19.1%. Not even I expected that. In particular, excise and capital gains tax are way up in December 2009 compared with December 2008. I wonder if there has been any change in the timing of payment of these taxes, that resulted in them being postponed from earlier in the year? I wouldn’t even hazard a guess for 2010 until I found out the answers to that and other questions. I wish the Department would stop fiddling around with the dates on which taxes are due, as it makes it much harder to analyse the figures.

No real change in the bond markets today. Did trade after the finance figures were published.

Irish 10year spread went out 4bps while the Greek spread tightened by about 9bps.

There was no Capital Gains tax due in Dec08 but there was one due in Dec09.

Even on the outlook for 2010 as a whole do you think we will be higher or lower than 2009 revenue?

“In particular, excise and capital gains tax are way up in December 2009 compared with December 2008.”
Aside from the poor weather dissuading long-distance shopping to your neck of the woods (which we should be able to tell by the outcomes for Newry?), I’d say there were expectations of significant excise raises and capital gains tax changes in the budget.

Retailers habitually bet on excise changes by either running down stock levels or by over-ordering before the budget. If they are right the sums they win can be quite big.

I presume it is also possible to declare capital gains at a particular point in time rather than waiting for the mandatory return date?

PS congrats on your forecast. I was also looking at 30 bn income, but that was from before the doubling of the income levies and other changes in the emergency budget.

I don’t suppose we have any idea of the particular effects of the budgets? (Given that income has varied quite dramatically from other years).

Woohoo – ONLY EUR 24,600,000,000!! I can hear the champagne corks at Leinster House from 3,000miles at the vanquishing of the 46.

(By the way, should that first link have gone somewhere other than where the second one went?)

Let’s hope nothing was buried into 2010 numbers to make 2009 look “better”…


On balance, I think that the tax take might be slightly lower (2% to 4% lower) in 2010 than in 2009. But, spending will quite probably also be lower, so I think that the deficit (as a percentage of GDP) will probably be a bit lower in 2010 than in 2009. What matters most is the deficit, i.e. the gap between the tax take and spending, rather than the tax take or spending in isolation.

For example, the government is slashing public sector salaries. This means that public sector employees will pay less tax. But, the amount saved by cutting public sector salaries will exceed the tax loss resulting from those lower public sector salaries.

I’ll predict that the deficit will fall to 10.5% (compared with 11.4% in 2009).

Of course, it partly depends on what happens in the UK and on sterling.

Inflation is surging in the UK. In addition, their VAT rate just went up to 17.5% and may well be increased to 20% in May if the Tories win the election. If all these occur, the cross-border shopping trade will dry up and tax tevenues south of the border will benefit. Of course, if sterling were to collapse, that effect would be postponed. For the record, I was in Derry and Strabane on Saturday, and the number of cars with southern registration plates in the shopping-centre car parks was well down on a year ago, although to what extent this was due to the weather I couldn’t say. So, there are quite a few imponderables but, as of now, I think the deficit will come down in 2010.

It doesn’t really matter who was closest to the final figure (or who’s got the biggest flame-thrower).

The fact is that how we (Ireland) live (spending) and how we can actually afford to live (income) are simply poles apart and you would have to completely beggar the country in terms of both spending cuts and tax hikes to get them anywhere near each other….. and in the meantime, our borrowing will keep going up and up and we will have to find more and more to pay the interest…… meaning even less available to spend. And that’s all quite apart from what else we may yet have to find to keep pumping into the banks and propping up NAMA.

If I ran a household or business like that I would be rightly condemned.

Or is completely beggaring the country going to be what passes for a ‘strategy’ to solve our problems?

@ JtO (and indeed everyone)

congrats on your figures, you’re slightly more optimistic and upbeat outlook is well needed in these difficult and downbeat times.

Also, posting your economic forecasts from an underground internet café in Vietnam?? Lucey and Whelan, i thought all you economic folks were bearded, tweed-jacketed, and in Summer schools in the Whist of Ireland at that time of year??? JtO proves economic forecasting CAN be cool…:D

Why does the term ‘tax burden’ not get enough coverage in discussion. This economy, worth somewhere around 160-170bn is only generating a tax take of 33bn.

That is a tax burden of about 20%. It is this that is the root cause of our deficit, yet the predominat position is that we need to cut cut cut from spending of 54bn(which incidently is is a spending burden in the mid 30s….far from excessive).

It is disheartening to hear some political and economic commentaria saying we cannot tax our way out of this recession or deficit. There is ample scope to increae taxes.

We need to design a tax system that can generate 50bn from ordinary economic activity. That means higher taxes across the board.

@Damien – “We need to design a tax system that can generate 50bn from ordinary economic activity. That means higher taxes across the board.”

As if they aren’t already, people would be leaving the country in droves. Everyone in this land of green grass thinks the grass is greener somewhere else! I agree we need to have higher taxes here but it has to be in conjunction with cutting our cloth too. Maybe the best starting point in ‘raising’ taxes would be to get rid of some of the tax breaks currently on offer in Ireland? And a good starting point in terms of our spending might be some of the quangos. too many TD’s, etc. etc. that are floating around. Too much ‘privilege’ for a few by far.

Whatever about the precise deficit figure, it is big and recurring. Many of the general public seem to think it is a once off and, now that the tax take has (temporarily?) stabilised, all is rosey in the financial garden.

The garden still needs a lot of cultivating. Hopefully it is not on a flood plane and the Government won’t run out of manure.

This has been discussed previously on this site and I am not sure that this is the most appropriate post to rehash the same material. But…

I think GNP is a much better measure of activity for the Irish economy and was about €140bn in 2009. Probably going to fall a little more in 2010.

Total government receipts in 2009 were about €53bn or 37% GNP.
Spending was about €73bn or 51% of GNP.

Another poster Ernie Ball posted this on the site previously.
Denmark 49.1
Sweden 49.1
Belgium 44.5
France 44.2
Norway 43.9
Finland 43.5
Italy 42.1
Austria 41.7
Iceland 41.5
Netherlands 39.3
United Kingdom 37.1
Hungary 37.1
Czech Republic 36.9
New Zealand 36.7
Spain 36.6
Luxembourg 35.9
Portugal 35.7
Germany 35.6
Poland 33.5
Canada 33.3
Ireland 31.9
Greece 31.3
Australia 30.6
Slovak Republic 29.8
Switzerland 29.6
United States 28.0
Japan 27.9
Korea 26.8
Turkey 24.5
Mexico 20.6
EU average 39.8
OECD average 35.9

Government revnue of 37% of GNP would put us above the OECD average and just below the EU average.
But spending of 51% would put Ireland very close to the top of that list.

The solution to the deficit is will be a combination of tax increases and spending cuts. Somewhere around 45% of GNP with a balanced budget which would put us just above France.

So that would be:
45% of GNP
Cuts of 8.4 bn
Tax raises of 11.2 bn

42% of GNP
Cuts of 12.6 bn
Tax raises of 7 bn

With some adjustment for increased taxes/decreased government spending.

That social insurance tax reform is really going to sting, isn’t it?

Did 2009 figures have an extra month because the budget was brought forward in 2008 and would this distort the figures?

In relation to the percentage of gdp or gnp that each country spends it is important to consider the composition of the spending. For example in the uk the nhs takes up significant expenditure as well as other services that are privitised in ireland such as waste disposal. The government charged services are also much cheaper. This gives a competitive advantage in that the wealth generating sectors benefit from their public spending to a greater extent. By contrast, in ireland it mainly goes on pay and social welfare. I would be interested to read a debate comparing these figures by you guys who know where to get them




Well done! I hope you continue to be optimistic and more importantly, just as accurate!

“I wish the Department would stop fiddling around with the dates on which taxes are due, as it makes it much harder to analyse the figures.”

Shhhhh! Foreign bankers read this blog!

We still cannot afford

@ Dreaded Estate
“Total government receipts in 2009 were about €53bn or 37% GNP.
Spending was about €73bn or 51% of GNP.” Where does the difference between €33bn in tax revenue and the €53bn total receipts come from?

Congratulations are due to JtOand it looks like some measure of fiscal stabilisation has been achieved with the prospect of an improvement in the current budget deficit for 2010. The details revealed in Notes 6 & 7 (some of which were already known) are a bit more worrying. The two (borrowed) contributions of €1.5 billion (2009 and 2010) to the NPRF financed (along with the €4 billion raid on the NPRF) financed to two €3.5 billion share purchases in AIB and BoI. These 2 €1.5 bilion contributions plus the €4 billion (lost) in Anglo comprise most of the non-voted capex. This has pushed the funding requirement up by €7 billion.

The NTMA came into the year with a big war chest in short term commercial paper (probably over a quarter fell due during the year and it’s not clear how much may be rolled over), but it has been forced to increase its reliance on bond issues upto €29 billion. (Perhaps if the famous “46” had focused on the issue of Government debt they might have escaped the Wrath of Garret!)

So far as I am aware much of this has been in Treasury Bills. Given the ratings agencies’ negative outlooks and spreads on longer bonds, this is no criticism of the NTMA, but it’s just kicking the ball out a bit further.

Even with an improvement in the current deficit, stable voted capex and some rollover of commercial paper the NTMA will be looking for something in the region of €22-23 billion. A bank recap of, say, €20 billion (and even with a massive raid on the NPRF) I can’t see the NTMA requiring less than €30 billion in bond issues during 2010.

Is this sustainable or achieveable?


does anyone know on the Exchequer Statement Dec 09 on Finance website under ‘Other Receipts’ what the amount of 6.7m for Pension Levy is. Would they have allocated bulk of pension levy under one of the tax headings seems a bit low! Emailed them out of interest a few months ago but surprisingly didnt get a respone.


yoganmahew Says:
“I’d say there were expectations of significant excise raises and capital gains tax changes in the budget….. …. I presume it is also possible to declare capital gains at a particular point in time rather than waiting for the mandatory return date?”

Yes, effectively. If you held a liquid asset which was “pregnant” with a capital gain, it would have made sense to sell it and crystallize the gain before the budget, as most people feared a rise in the CGT rate from 25% to 30% or more. Had you sold the asset before 30 November, the tax was due on 15 December. So the higher CGT tax take would at least in part mean that the yield will be lower at some date in the future.

@Paul Hunt
Garret Fitzgerald deliberately set out to destroy any momentum generated by the economists letter opposing NAMA. He did it by generating a controversy over a side issue which would allow him to slag off their credibility. It was completely disreputable but alas extremely successful.

@ E65bn

“He did it by generating a controversy over a side issue which would allow him to slag off their credibility.”

He didnt ‘generate a controversy’. He generated a discussion point which some people considered to be a controversy. If everyone has been fine with the ’46’ using the €30bn, then no one would have cared what Dr Fitz said. The key issue, however, is that quite a lot of reasonably smart people thought there was an important issue at hand. As i said at the time, by seeking to stretch the deficit figure to something beginning with a ‘3’, which obviously is far more eyecatching than ‘2’, the 46 opened themselves up to accusations of scaremongering etc (remember, there was two issues at hand: the size of the exch deficit, and the use of the exch deficit vs the gen govt deficit), and that this accusation would distract from the core substance of their article.

Like it or not, thats exactly what happened, and like it or not, Dr Fitz has been entirely vindicated in his position. As for the “slagging off”, when we look back at Dr Fitz’s contributions vs your own, which do you think will contain more “slagging off” of people?

@ Eoin

In relation to “scaremongering” it might be worth taking a step back to remember the substance of Dr. Fitzgerald’s intervention. His stance was that NAMA should be passed because failure to pass it would lead to an election and that this could lead to us being shut out of international sovereign bond markets. Similarly, his position in relation to the discussion of the deficit in the “46” piece was that this was dangerous talk that could lead to the bond market ceasing to lend to us.

It is open to question here who exactly was scaremongering—those who were warning of large losses associated with NAMA or those who said the bill simply had to pass or we would unleash a sovereign debt crisis.

TINA – There is no alternative and TOGIT- the only game in town were the monikers of the insiders. GF is the consummate insider, and thats fine. What I found bile inducing was his willingness to deliberately , for whatever reason, ignore the large grey tusked mammals dancing in the room to comment on the colour of the wallpaper.
Truly we get, got and will get the leaders we deserve.
As for it being 25b not “close to 30b”, big whoop. Were saved. All we need to do now is to implement a few more mccarthy reports and we are out of the woods. We could start by looking at why it is that the gerontocracy get to escape scot free…

@Brian Lucey – “Gerontocracy”

For an economist Brian, your knowledge of the English language never ceases to amaze me. Is there a word for old people who USED to govern and think that they still do? No rude ones please!

Well Joseph…..I thank Mary Godfrey of CBS Cahersiveen for any ability I have to drag odd words from the crypt.
Technically a Gerontocracy is rule by the elders. Now, if we define rule as “ability to influence and get things done” then GF is still one of the ruling classes. However, websters defines it as wider than rules, defining it as “…exercising control”.
Maybe here we have a Tyranno-gerontocracy, given the ability of the elders to usurp the normal rules of how society works? just musing now but its clearly better (from a narrow economic perspective of marginal pain suffered in the putrefying bowels of the celtic tiger) to be an elderly retired than to be a hardworking younger one….

@ Karl

apologies if you thought i was dumping on you there, that wasn’t my intention. Im simply trying to explain that for a lot of people, whether they agreed or disagreed with the 46’s piece on a substantive level, that they felt Dr Fitz had a point bringing up the issue of the €30bn deficit. It wasn’t so simplistic as him “creating a controversy”. His comments at the time were as follows:

“Moreover, the statement made that we’re moving towards a deficit of €30 billion was quite irresponsible and that destroyed my confidence in the 46 economists.”

As i said at the time:

“While Dr Fitz’s criticism may be unfair on your opinion piece, picking a loose and eye catching deficit figure, in what was always going to be a controversial article, allows for an easy and valid opportunity to shoot down your argument right from the get-go without ever having to criticise many of the actual valid arguments you brought up within it.”

No offence, but is there anything inherently incorrect with how i saw it then, and how its played out since?

Fitzgerald knew exactly what he was doing. You don’t get to be Fine Gael’s most successful ever leader without having excellent political skills. The shoes he was wearing may not have matched but he knew precisely when and where to stick out his foot.

Dukes and himself will be seen as some of the key people responsible for NAMA being implemented.

@ E65bn

“The shoes he was wearing may not have matched but he knew precisely when and where to stick out his foot.”

Im sorry, but does someone want to explain what exactly the first half of that sentance refers to?

@John The Optimist

Credit where credit is due (-;

25B or 30B – is still a lot of billions. Time for some broad and imaginative ideas on the ‘structural deficit’ – and going beyond the mere numbers to HOW and the type of society/economy to aim for – levels of general welfare, tax strategy, industrial policy etc more than the Kutz Kutz brigade – to real productive revenue generation ……..
There is no future in low-cost, low skill production ……..

Garret has been known to get the odd sock and shoe mixed up at times – but cleverly when elections are in full swing and sympathetic photographers are around – the populace loved it.

Brian Lucy states:

”…Maybe here we have a Tyranno-gerontocracy..”.

Maybe what we have is a soft form of fascism.
The State has been aligned with Corporate interests and the power of the State is now used to uphold those interests.
The rights of Irish citizens are not considered unless they coincide with State/Corporate alignment.

As the economy declines and civic society is increasingly tearing itself apart the States/Corporate power is augmented at a frightening pace.
A reading of NAMA confirms the status the state now has to enter new arrangements with business and new constraints imposed on civic society.

You know the jig is up politically when the likes of Mattie McGrath FF TD and accomplices who routinely clown around on talk radio provide more effective political ‘opposition’ than the opposition.

This wasnt, in my view, a game. GF KNEW, and deliberatly used that knowledge, that the comment was broad contextualisation of the billions to be overspent on NAMA. He KNEW that his views would be taken as oracular, regarless of their inherent merit. He KNEW that in deflecting this discussion from “should we overpay” to “is it 25 or 30b angles that will dance on the head of the pin?” that the substantive point would be lost. The question we need to ask is : why do this? Qui Bono from the gerontocrats gerontocrat wading in?
GF’s view was, as so well put by Karl, “pony up, dont scare the horses”. Well, GF will have ridden off into the sunset well before the livery stable bill is due. Qui Bono??

David O’D
Heres an idea – no more pensions for retired public servants at the going rate of the job, COLA instead. No more limo-for-life for retired ministers or taoisaig. No cars from the ministers indeed, a bus pass (watch CIE improve….). Most people, outside the cushy hibernation pad that is LH, are full of ideas….

@Brian Lucey

Agreed on the transport – something as simple as the ‘bus pass’ could trigger some interesting innovations from Leinster House (-;

Pensions and Health are the real big ones – across the population – and unavoidably linked to taxation ……… push the ‘nether regions’ UP …… can be done in a generation (25 yrs or so) – look at Singapore – course that was a Dictatorial Transformation ……… but in times of crisis, and possibility that the boat could sink, and vested interestes oppose essential structural change – then only option in the commericial world is a dictatorial transformation – what is different here?

Keep up with the ideas …………….. and for the next ‘letter’ try to get the full front page of the Star and the Daily Mirror as well – now that you are out (and welcome) from the ivory towers – hang in there for the long haul ………


“JohnTheOptimist. Have you included any bank money for recapitalizations in the 10.75% deficit?”

No, I haven’t. My prediction is for the general government deficit. Isn’t it the exchequer deficit that includes bank money for recapitalizations? However, the difference between the two (the subject of a lot of debate on this site in 2009 as to which was the more important) may not matter in 2010. Both ESRI and Davy forecast that the exchequer deficit in 2010 will be slightly lower than the general government deficit (somethinng to do with banks repaying capital which I don’t fully understand).

Regarding my forecast of 10.75% of GDP for the general government deficit, I see that Davy this morning predict that it will be ‘below 11% of GDP in 2010’. So, quite close to mine. Doesn’t guarantee it will be correct, of course.

@ Brian & Karl

my point is that you can only “create a controversy” if you have a talking point which a lot of people see some merit to. He doesn’t create the controversy, the lowly readers do. If he accused you all of being blood sucking devil worshippers, and that thats why he had lost all confidence in your appraisal of NAMA, well then he probably wouldn’t have found too many people nodding in at least cautious approval.

The point is, he picked out what to many people was a very contentious, potentially selective, and in some peoples’ minds dangerous, budget deficit figure. As i said above, “While Dr Fitz’s criticism may be unfair on your opinion piece, picking a loose and eye catching deficit figure…allows for an easy and valid opportunity to shoot down your argument right from the get-go”. You can complain all night long about what you think his true motives were, but i don’t think you can complain that he didn’t have a minor point, or that he didn’t strike a chord with lots of reasonable people. The only other way to read into your feelings on this is that you think that anyone who took GF’s side on this is somehow stupid and naive as to his true notives, but im hoping that thats not the tac you’re coming from on this.

As to the “the 30bn figure doesn’t make a substantive difference to the argument”, well than can i ask just why the hell you decided to use it, if not for its eyecatching size?

Government accounts are murky at the best. So whether something is classified as general government deficit or exchequer deficit can be quite arbitary.

I was under the impression that any money used to recap Anglo would have to be included within general government deficit. But could be wrong.

@ Eoin

I think I’ve already said, on a number of occasions, that close to €30 billion was a reasonable forecast for the EBR given what was known then. You keep claiming that it was something to do with having an eye-catching figure. I don’t know about that — it didn’t jump out to me when I read it as being unreasonable.

On the issue of what people thought of Dr. Fitz’s intervention, you apparently believe we live in a world where lots of people have strong opinions on the precise anticipated size of the budget deficit and take a strong interest in stuff people have to say about it.

On the other hand, I reckon we live in a world where people find it interesting when a former Taoiseach from another party makes a public statement appearing to support the government’s most controversial policy! It was that rather than some quibble about deficit figures that made it a media story.

I say “appears to support” NAMA because Garret now argues that he didn’t endorse NAMA at all: Instead, he says

“More recently, while expressly refusing to comment on the relative merits of the National Asset Management Agency and the alternatives put forward by the Opposition parties, I urged that they concentrate their main legislative efforts on the only scheme that was actually before the Oireachtas, viz Nama.”


Despite this, many people (including some of the louder commenters here) will never tire of telling us how Garret the Great supported NAMA and how his intervention tipped the public’s attitude in favour of it. Nonsense of course, but you can’t stop people believing their own truths.

@ DE

There’s a strong argument that the Anglo money should count in the GGB. Last year’s money put into it didn’t but that was a bit sneaky. This year’s might have to. I discussed this here.

Quote below:

I would note that even by the official definition of what is counted in the GGD and what isn’t, the call that the money that has gone into Anglo shouldn’t count as part of the GGD seems to be a dubious one. Here’s a link to the ESA95 documentation on this issue. Now go to page 58 of the PDF file. It’s the first page of the section discussing the appropriate accounting treatment for capital injections in public corporations. The section distinguishes between financial transactions, which should not count against the deficit, and non-financial transactions, which should count against the deficit. Non-financial transactions are described as follows:

“Acting this way, the government expects nothing in return in terms of dividends (most of the time the enterprise receiving such transfers does not pay dividends), nothing else than an improvement of the corporation’s wealth and the meeting of some social needs”

I would argue that this describes the Anglo capital injections pretty well and so they should count against the GGD. It will be interesting to see if, after the NAMA transfers, the government can continue to claim that Anglo capital injections don’t count against the GGD.

@Kevin Barrett
“Where does the difference between €33bn in tax revenue and the €53bn total receipts come from?”

The €33bn doesn’t include PRSI neither the employers or the employees. It also doesn’t include the health levy. These are netted off against the relevant expenditures.

Some other incomes also aren’t included within the €33bn.

Courtesy of yoganmahew on the pin.
See page 21 the document below to see the true revenue figures.

let me see – lets say we had said “we predict a deficit of 25b”, or “facing massive deficits” do you think GF would said, oh, thats fine, yeah, I agree with them? Come on.
Its not, Eoin, as I think you know, an issue of the size of the deficit (eyewateringly large or holy-s**te large), its THE EXISTENCE of it. so, not to talk for Karl, for me, let me make it clear : for reasons known to himself, its my opinion that GF took an essentially minor point and used it to derail an argument that in no way depended on it. Now, thats just my view. Id love to know what he thought he was achieving, but we will never know. Course, he could come on here and defend his views…..

@ Brian and Karl

my point has never been about whether the 30bn figure was in itself important in real terms vs 25bn. The point, as i have always contended, was that it was vague, toppish, eyechatching in that it began with a “3”, and easy to shoot down, (a) in terms of the EBD vs GGD and (b) because by your own words you took an ESRI figure of 25.7bn, added in your own calculations and got to 28bn. Yes, this is not the same as “equal to 30bn”, but I think we all live in a world where lots of ordinary people read a newspaper article quoting “close to 30bn deficit”, and they read simply “30bn”, and think of a “deficit” as the one which is typcially discussed in the papers, ie the GGD. Presto, they think the GGD will be 30bn, when the government has been insisting it will be a lot closer to 20bn. You know this, i know this, and i suggest Dr Fitz knew this.

It doesn’t matter whether GF was right or wrong in attacking you, you simply shouldnt have given him the opening to do so. Simply giving more detail on how you got to 28bn, or simply saying that this could play out in some of the bad scenarios, would’ve cleared it up and prevented GF’s attack, but alas you didn’t decide to go that route.

FFS eoin dont you get it? Its not about the figure – GF imho would in any case have said “these youngfellas, dont know who they are , scaring the horses, tina, togit, rhubarb rhubarb…”
It does matter, I think, if someone of his stature, for whatever reason, decides to ignore the facts and get onto a hobbyhorse.

Another striking moment in the NAMA debate occurred at the weekend of the Dublin Economics Workshop in October in Kenmare.

Denis O’Brien is I believe a personal friend of Sean Fitzpatrick. He also has spoken of the support he received from Anglo when setting up 98 FM (if only they had stuck to lending to non-developer SMEs). Given that, he really shouldn’t have been slagging off economists for spending too much time discussing the largest financial decision in the history of the state.

Sean O’Rourke used these comments in his introduction:

“Presenter Sean O’Rourke introduced a report on the Dublin Economics Workshop in Kenmare (18 minutes in) by quoting Denis O’Brien’s comments about academic economists spending all of their time twittering and taking out ads in the newspaper.”

O’Rourke (who is having a terrible NAMA/banking crisis), after referring to Garret Fitzgerald’s endorsement of NAMA, then urged Pat Rabbitte to don the kryptonite jersey:

“Is there something to be said, and this is a theme that Garret FitzGerald has touched on in the last couple of weeks in his column, that there may be a case for people to pull on the green jersey as it were, set aside some of their more extreme doubts about NAMA and just see it through and give it a fair wind?”

But as if all this happening on one weekend wasn’t enough the NAMA lobby took two further steps to appease critics and silence debate through an apology/attack strategy:

Pat Farrell apologised to the economists for the state of our banks.
Pat McArdle told Morgan Kelly to shush: “Freedom of speech is fine and we’re all in favour of it. But there are sometimes when you have to temper things in the greater interest.”

As Karl Whelan commented at the time, although not quite in the language I use, a corrupt government had persuaded a remarkable number of commentators to give it unqualified backing for it’s corrupt bailout of its corrupt associates:

“So this is what it’s come to. People can object to the government’s policies on the budget or health or education or whatever but objections to NAMA—an initiative that involves spending up to €54 billion of public money—must be condemned as unpatriotic.

“In a supposedly open and democratic republic, this idea—that you should refrain from objecting to a government’s economic policies because this criticism runs counter to the national interest—would normally be considered morally repugnant. It says a lot about this country that this opinion is now being regularly aired by mainstream commentators in our print and broadcast media.”

As Paul McDonnell commented at the time:
“When someone challenges freedom of speech in the way that P McA has done it is not ‘doing his job’ for O’Rourke of RTE to simply kick the ball on by asking ‘isn’t that a valid argument – or whatever’. The correct, much more interesting, and more professional response is ‘what is it about the anti-NAMA argument that makes you so uncomfortable and would cause you to say such things.’.”

After the debate nobbling by the 2 former FG leaders, this was probably the biggest assault by the NAMA lobby, and I think it worked.
After Kenmare many economists donned the kryptonite jersey and the media impact of Morgan Kelly’s presentation was completely destroyed.

With the debate on the NAMA bill about to commence, it’s leading FG critic gagged by Kenny, and the FG & Labour finance spokespersons happy
to just go through the motions, the way was now clear for NAMA.

Here is Pat Farrell of the Irish Banking Federation’s apology to the public in February 2009:

‘While the causes are many, there is full acknowledgment that the sector must take its share of responsibility for the crisis.”

– Pat Farrell, chief executive of the Irish Banking Federation (IBF), isn’t in the running for this week’s Barack “I screwed up”Obama award for most unqualified apology.

But he said more at this time:

“When asked if the banking sector owes an apology for irresponsible activities, Mr Farrell said “we have made mistakes as a sector”. Those who are responsible must be held accountable, he said.”

I agree with him they must. But one year and three months after the guarantee almost all of the executives and the vast majority of the board members of the many lenders who lent huge multiples of people’s salary, leaving tens of thousands facing negative equity, declining incomes and personal bankruptcy, are still in office. The public lose their jobs – two hundred thousand of them – while the lenders retire with huge payoffs.

Pat Farrell spoke in early February 2009. Almost 11 months on the government has still not held the lenders to the standards even the IBF
believe should apply.

Pat McArdle, in an article that refers to Pat Farrell’s apology to the economists, says the following.

“Unusually for Kenmare, no one questioned the need for a strict fiscal policy; no one disputed the need for early action. However, it is equally clear that there is a gulf between this “informed” view and the man in the street.”

The man in the street – and even the head of the Irish Banking Federation -expected early action from our establishment to make the boards and senior executives of our lenders – say the top 1,000 – accountable, and say 100 of them criminally. Instead we have a vast gulf between the effect of the banking crisis on the public and on the bankers & elite who caused it.
The public get the sack, they get a payoff. We are jailed for not paying our TV licences, they cause €100 Billion of damage and get a bogus investigation for PR purposes.

There was one sign of very honourable behaviour though:
“John FitzGerald apologised for not having forecast the credit crisis..”
Some apologise perhaps too much for errors of judgement made worldwide and in good faith, others, like our government, take no responsibility at all for the consequences of their recklessness and corruption.


GF has real stature for real reasons. GF was proven correct in relation to the deficit. You were proven wrong. Perhaps you should leave the issue of GF, his motives, his stature, his hobbyhorse and his appreciation of facts aside for the moment.

@ zhou
He said nothing when Sean O’Rourke and many, many others designated him as a NAMA supporter. He has a weekly column in a national newspaper. A two line statement would have sufficed: “Nothing I have said in relation to the economists letter should be taken as indicating support for NAMA.”

This is how Stephen Collins saw it:

“It was not until former taoiseach Garret FitzGerald, and former Fine Gael leader Alan Dukes, expressed support for Nama as the least worst option available that some kind of balance began to come into the debate.”

Miriam Lord said:
“Nobody said a bad word about Garret FitzGerald, who also nailed his colours to the mast in his Irish Times column on Saturday. Sort of. Kind of. But not really in any criticism of Fine Gael way. At least that was the line yesterday.

No. You see Garret is so good, and concerned, and worried, that he thinks Nama might as well go ahead because, while he doesn’t know if it will work, it’s better than nothing. And nothing means the IMF coming in to return us to the Dark Ages and take away our decking.”

There were many alternatives. He backed the NAMA one but even worse claimed there was no alternative. He was part of the NAMA lobby.

“GF has real stature for real reasons. GF was proven correct in relation to the deficit. You were proven wrong. Perhaps you should leave the issue of GF, his motives, his stature, his hobbyhorse and his appreciation of facts aside for the moment.”
Indeed, snippy

Heres the thing – your premise, that “he was right” is wrong. He was wrong. His strong, almost hysterical , view was that discussing the likely magnitude of the deficit was scary-bad-unpatriotic-horse scaring. As for 25 vs “close to 30”, which would be oh, 27 or 28, big whoop. His premise seemed to be that we wre a bunch of young fellas hed never heard of mouthing off. there was a subtext that some “leading” economists were missing from the list (gee, wonder why some did – job interviews, and legal briefings on landmark high court cases maybe?) I strongly suspect from listening and re listening that he never really fully read and understood the rest of the article. He sure seems to have no clearly outlined objection to overpayment. In this case, lets take silence as assent

As for his stature, well thats a matter of political perception, but my recollection is fairly clear that his economic policies were —-mixed—-shall we say.

So nope, thanks I think ill chew on this for a while in between writing up about regime switching GARCH models of sovereign bond spreads in the eurozone in 2008. Unlike GF, while I get a good if now reduced salary from the state, I have to get up and move things along in the morning. As I said before, GF is computer literate, and can (but has choosen never to) come on here to give his views.

sean o’

Again with the accuracy!

You will also recall that events in the thirties took on a smilar tone as blue, brown and black shirts took on political significance. The problem with modern economists is that they can measure and calculate finely but know no history whatsoever. Niall Ferguson put Krugman in his place. Niall will win no IGnobel prizes!

Anyone with sense has been liquidating like crazy, and looking for a safe haven. After all it was easily seen what was likely to happen. What bugs me is that they paid. It runs counter to my thesis, that they would hang around at all, and therefore pay taxes which become statute barred, if they were so smart. Perhaps withholding taxes were more involved than normal? As when “non-residents” sell of land etc. Damn, why are there so many honest solicitors!!!! Rats leaving a sinking ship!


“As I said before, GF is computer literate, and can (but has choosen never to) come on here to give his views.”

That is a fair enough comment. It would be great if he posted here.

But, I could say (and frequently have said) the same about Morgan Kelly.

Perhaps both should be invited to post on here.

I’d like to get my teeth into Morgan Kelly as much as Brian Lucey, Karl Whelan and the rest of the ’46’ would like to get their teeth into Garret Fitzgerald.

Regarding the size of the deficit in 2009 and who was right and who was wrong, it is now history. As Tony Blair might say, let’s move on. We should now focus on what the deficit will be in 2010. Any predictions?

The latest ESRI predictions for the deficits in 2010 are:

general government deficit: 18,560 million euros
exchequer deficit: 18,161 million euros

So, two points:

(a) The deficit In Ireland is coming down. In most countries, it is going up. The subject for debate in 2010 will be how far below 20 billion euros it will go, rather than 2009’s debate on how close to 30 billion euros it will go.

(b) The debate (which got quite heated in 2009), about whether it is the general goverment deficit or the exchequer deficit that is the more important, is academic in 2010 – the two deficits are predicted by ESRI to be almost identical in 2010.

Since ESRI published these forecasts in December, the deficits for 2009 have turned out to be approximately 620 million euros lower than they estimated then. So, they may well now revise their forecast deficits for 2010 down by a similar amount.

Davy also today forecast that the general government deficit would fall to between 10.5% and 11.0% of GDP in 2011, compared with 11.4% in 2009. They say that the government forecasts for the deficit (around 11.5%) are now too pessimistic.

Both ESRI and Davy also now forecast a balance-of-payments surplus in 2010, which is one of the factors distinguishing Ireland from other countries like Spain, Greece and Iceland, whose financial problems and need to borrow stem as much from large balance-of-payments deficits as from budget deficits.

So, it is clear that, at least in relation to the financial crisis, possible IMF involvement and the possibility of Ireland going bankrupt, the corner has been turned. A few months ago, it was being widely predicted that the deficit would continue to rise to around 16%-17% in 2010. This is clearly not gow going to happen.

Of course, this financial turning-of-the-corner does not in itself turn the real economy around. However, once it dawns on the public that Ireland is not going bankrupt, the IMF are not coming in, and that a lot of the media claims to the contrary have been quite hysterical and alarmist, there is a good chance that consumer confidence will rise, people will save less and consumer spending will rise. That is what the government should be aiming to achieve. They have been quite lackadaisical about getting this message through up to now. But, there are now a few straws in the wind that it is starting to happen. A number of surveys since the budget show an increase in consumer confidence. According to SIMI, new car sales in December were up 60% on December 2008. While I don’t attach much importance to figures for December car sales (they are always very low), this is the first tentative sign that consumers are starting to spend again. Another straw in the wind is that IKEA in Belfast are making 21 staff redundant because there has been a drop in shoppers from south of the border. While I don’t welcome any redundancies, this is another sign that, a narrowing of VAT differentials, excise duties, and much higher inflation in the UK than in Ireland, is leading to an onging fall in cross-border shopping (as I predicted in another thread a month or so ago).


To assert that €27bn is “close to €30bn” is questionable when each €1bn represents about 0.5% of GDP!!

It is a bit fanciful to expect GF to reply to you here considering the light in which you paint him and his actions. Furthermore, one quality which most politicians have is that they get over the personal slights which befall them in their public life. They know that to crib, moan and to engage in personal tit-for-tat insults will make their position look weak and will make them unattractive to the public.

GF has experience of having his “arse in the bacon slicer” (as Mick McCarthy might say) in terms of national solvency and borrowing. He has also been through turmoil before and made his share of mistakes. Therefore he comes from a position of not only being an economist but also of having huge practical experience of these issues including the importance of communication. Your IT article of itself may hnot have scared the horses but GF felt that it was important to kill your (now admittedly vague) suggestion about the deficit.

As for GF supporting NAMA, again GF has practical experience of the Oireachtas and the legislative process. We are in a democracy where the Government controlling a majority in the Oireachtas propose the legislation that will be passed. The best FG or Labour could hope for was to bring down the Government. You suggested on the Morgan Kelly thread that further economic collapse might not be such a bad thing if it led to the kinds of political reforms you would like to see. I am starting to wonder just how extreme such reforms might be considering your unwillingness to accept the reality of our legislative process.

GF, like any blue-shirt would, lambasted FF for past performance but he pointed out that it would be an act of high folly both economically and politically to bring down the Government at that point. Horses can be scared and not al investors are sober pragmatists. Risk aversion is massive and sentiment can swing quickly as in the case of the real risk of contagion from potential Greek default as expounded upon by Philip Lane elsewhere on this blog.

You previously said that you were willing to take a chance on insititutional depositors withdrawing billions from Anglo in the case that its winding up was announced thereby immediately crystallising massive obligations for the exchequer. I think I would rather follow GF’s prudent approach to market sentiment than your brinkmanship.


I guess you don’t do smug, but you are entitled to feel some modicum of it.

I also reckon there is a roaring black economy hiding behind these fugures. One should never underestimate the resilience and ingenuity of people under pressure. However, there is still a substantial structural chunk in the deficit that will have to be addressed.

My focus is on the issue of bonds by the NTMA that will be required to finance this party. Last year it issued almost €30 billion. I can’t see the total net new issue falling much below this for 2010. On top of this they will need to rollover relatively large tranches of short term bonds and commercial paper. Yes, only €18 billion or so will be required to finance the current deficit and the remainder will finance “investment”, but probably half this remainder will go into recapping the banks. There is no guarantee that the Government will be able to get in and out quickly of bank recapping.

I think it would be very useful if someone (obviously with far more knowledge and capability than I have) could bash these “tennis club” accounts of government into something that resembled an income statement, funds flow and balance sheet. Of course, it wouldn’t measure everything of importance, but I think we’d have a better framework for a sensible debate on the policy issues.

@ Paul

actually just out from the NTMA…


Not sure if this is “excluding bank recap” or whatever, suppose laerge amount of this yrs recap could come from NPRF…

By the by, Ireland will be almost unique within Europe in issuing LESS in 2010 than in 2009 (chiefly due to their being almost no redemptions in 2010).


Many thanks. This NTMA release is probably worth a thread of its own. Since I don’t watch the NTMA as intently as others I wasn’t aware they’d secured over €35 billion. This gives them more than €5 bn carryover which with the net new €20 bn you have highlighted should cover the current and voted capex deficits.

They have more than €22 bn in the NPRF, but, presumably, this includes the €7 bn buried in BoI and AIB. That leaves €15 bn potentially available for the bank recap, but I doubt it would be possible or wise to devote all of this to the bank recap of, say, €20 bn. Even if they were to, they would still need another €5 bn which gets us up to €25 bn net new issue. The carryover of €5 bn brings down my original €30 bn to €25 bn.

They make it all seem eminently plausible, but I ha’ ma doots. We still have a big structural element in the current deficiet and, despite the NTMA’s best efforts, debt service will continue to increase annually.

I know I am coming to this discussion a little late, but the issues involved are clearly of ongoing relevance. As a non-economist, and as many of the figures involved are opaque, I wonder if someone could briefly outline the structural and non-structural elements of the deficit. I think there is little point in discussing a €25bn deficit (or an 11% of GDP deficit) in the abstract. If the figure includes one-off payments to Anglo and the other banks, or even if they includes extra expenditure on unemployment benefits that will reduce as we return to growth, we should not be too hung up on the overall deficit figure. What is more important is the structural gap between normal government expenditure and income, and how this gap will be bridged over the coming years. It is entirely appropriate to borrow for the one-off costs and pay them down over a longer period.

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